Consumer Law

Do retailers offer phantom discounts? Suits target pricing


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Are those Black Friday discounts for real?

The Wall Street Journal (sub. req.) says retailers often set starting retail prices so high that the discounted price will give them the profit margins they want. The strategy isn’t deceptive, according to Federal Trade Commission guidelines, if the higher price “was offered to the public on a regular basis for a reasonably substantial period of time.”

But some unhappy shoppers are fighting back in lawsuits claiming that they bought merchandise touting discounts that turned out to be illusory. Among the retailers facing suit over alleged phantom discounts are J.C. Penney, Kohl’s and Jos A. Bank Clothiers, the story reports.

In the Penney’s suit, Cynthia Spann says the three blouses she purchased at $17.99 each in March 2011 were marketed as being 40 percent off the regular price. But the prevailing price for the blouses in the prior three months was the same as the sale price, she alleges.

The retailers declined to comment on the suits, though a Jos A. Bank spokesman said two other suits making similar allegations were tossed earlier this year. The Los Angeles Times published a story in May about a ruling in which the San Francisco-based 9th U.S. Circuit Court of Appeals found a consumer had standing to pursue a class action against Kohl’s over its discount pricing, as long as the consumer would not have purchased the goods but for a misrepresented discount.

Hat tip to Pat’s Papers.

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